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Providing coverage of Alaska and northern Canada's oil and gas industry
October 2005

Vol. 10, No. 42 Week of October 16, 2005

House OKs gas line loan guarantees sunset

Energy bill provision signals proposed pipeline’s importance to national interest; bill also provides for expansion of refineries

Rose Ragsdale

Petroleum New Contributing Writer

The U.S. House of Representatives passed by two votes Oct. 7 a bill that establishes a two-year time limit for the use of federal loan guarantees in building the proposed $20 billion Alaska natural gas pipeline.

The measure was included by Rep. Joe Barton, R-Texas, in a broader piece of legislation that barely won approval in a 212-210 vote even though it cleared the way for U.S. oil refineries to expand.

Faced with an American public clamoring for relief from climbing energy prices, the much sought-after Gasoline for America’s Security Act of 2005 was expected to fare well on the floor of the House, especially after Republicans dropped a White House-backed provision that would have eased clean air restrictions to help refineries and coal-powered utilities.

Instead, Republicans barely won the day in a tense roll call that lasted more than 40 minutes — far beyond the allotted five minutes.

Goal: adding 2 million bpd of capacity

The House bill aims to add 2 million barrels per day of capacity by offering abandoned military bases for refinery construction sites.

It speeds up permits by giving the Energy Department more authority over the process, and offers federal insurance to refiners in case new projects are delayed, among other provisions.

Consumer groups said the legislation would do little to help American households facing near-record fuel prices.

The sunset on the Alaska gas pipeline loan guarantees, Section 204 of the bill, is aimed at expediting development and construction of the 4.5 billion cubic feet per day Alaska gas line. Specifically, it precludes the U.S. Secretary of Energy from entering any agreement to provide the loan guarantees under the Alaska Stranded Gas Development Act after the end of 24 months from enactment of the new legislation.

Katz: not expected to impact negotiations

The provision likely won’t have much effect on the pace at which natural gas line negotiations are moving in Alaska, according to Special Counsel John W. Katz who directs the state office in Washington, D.C.

“Hopefully, the gas line negotiations the state is conducting with the producers will be resolved relatively soon and well before any two-year sunset takes effect,” Katz told Petroleum News Oct. 11. “What (the sunset provision) does do is send a signal to all concerned that Congress is very interested in what’s going on in Alaska.”

He said the new limitation on the loan guarantees is related to two provisions that Congress included last year in the Alaska Natural Gas Pipeline Act — one that requires the Secretary of Energy to periodically report on progress toward getting the gas line built (a report is due in February) and another that requires the secretary to come up with alternatives for getting the pipeline built if the State of Alaska and the private sector have made no significant progress within 18 months.

“The three provisions together are an ample demonstration that Congress wants to see the gas line built and doing so is in the national interest,” he said.

Still, the sunset provision takes effect when the energy bill is enacted and enactment, at this point, appears problematic because the Senate has different ideas about what should be included in a post-Katrina energy bill, Katz observed.

He said the Senate, unlike House members, may be reluctant to waive environmental requirements for new refineries, and the senators may want to look at outer continental shelf oil and gas leasing to see what might be done to speed the process and provide access to more OCS areas.

“It’s not clear how long the Senate will take,” Katz said. “The budget legislation will certainly go to conference.”

Companion legislation fizzled

Companion energy legislation marked up Sept. 26 in the House Resources Committee fizzled in part because of sharp disagreement among committee members on OCS oil and gas leasing, Katz said.

The Resources package also included a provision to open the coastal plain of the Arctic National Wildlife Refuge to oil and gas drilling.

“That bill had two controversial provisions, offshore drilling and ANWR,” said Jerry Hood, a lobbyist for Arctic Power in Washington. “All of us agreed it made no sense for the House to fall on its sword over ANWR again when there was no hope of getting 60 votes in the Senate.”

Pro-ANWR strategists, instead, are pinning their hopes on the budget reconciliation process, which begins later in October. A Senate budget bill would be immune to filibuster and would require only 51 “ayes” for approval, rather than the 60 affirmative votes needed to pass energy legislation.

The House Budget Committee is scheduled to mark up its budget bill Oct. 18, and the Senate budget bill markup is set for Oct. 19. Both houses will likely vote on the measures in early November, Hood added.

“All indications are the budget process will go ahead, and ANWR will stay in the budget process,” said Roger Herrera, an oil and gas consultant who has promoted ANWR drilling on Capitol Hill for many years. “It should be over by the first half of November if the budget process goes forward in a normal fashion,” Herrera said. “But the likelihood of that happening is remote. One can never be certain when there are so many extraneous factors at work, such as the political fighting over the (Harriet) Miers nomination and the aftermath of Katrina.

Herrera said long experience working for ANWR drilling in Washington, D.C. has taught him caution when it comes to anticipating congressional action.

“We hope the political process doesn’t go south on us, but the reality of politics is it could spoil it all,” he added.






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